This is what Allergan’s move to allow meeting on Valeant takeover means

By Russ Britt

Allergan Inc.’s move late Monday to allow the Dec. 18 special meeting on whether to accept Valeant Pharmaceuticals International Inc.’s hostile $53 billion takeover bid doesn’t mean the company is throwing in the towel, but it does remove a potential speed bump for Valeant.

Botox-maker Allergan was hoping to have the 9.7% of its shares owned by dissident shareholder William Ackman and his Pershing Square Capital Management invalidated, claiming they were obtained by Ackman after he consulted with Valeant about a possible takeover of Allergan. Allergan alleges that this constitutes insider trading, while Ackman and Valeant contend they were previously owned jointly under a Pershing fund.

Further, Allergan was hoping that invalidating the Ackman shares would in turn mean that Ackman and Valeant had not obtained enough support to call the special meeting — owners of at least 25% of shares are needed to call these meeting, and originally somewhere slightly north of 30% were obtained. Taking away the Ackman shares would have put support at around 20%, below the required threshold, but Valeant and Ackman have since secured support for the meeting from owners holding nearly 36% of shares, enough to hold the meeting without the Ackman voting bloc.

Allergan agreed to hold the meeting if Valeant would drop a lawsuit in Delaware that challenged the company’s bylaws regarding special meetings, and the 25% requirement. But Allergan still is hoping a California judge will invalidate ownership of the Ackman-Valeant shares before the special meeting.

That would raise the bar for Ackman and Valeant. They would need to oust six Allergan board members and replace them with their own slate of directors. Ackman and Valeant still would need a majority of 297.2 million shares for the takeover, but wouldn’t be able to count their roughly 29 million shares among them.

A few technical notes, according to Allergan sources: Because this is a special meeting, Valeant needs a majority of all 297.2 million outstanding shares. Had Valeant tried to swing a takeover during Allergan’s regularly scheduled annual meeting in May, it would have only needed a majority of the votes cast at that time.

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